Question 1

Investment in

Accepted Answer

A) physical capital, unlike investment in human capital, has an opportunity cost. 
B) physical capital, like investment in human capital, has an opportunity cost. 
C) human capital is particularly attractive because it involves no externalities. 
D) human capital has been shown to be relatively unimportant, relative to investment in physical capital, for a country's long-run economic success. 
A) physical capital, unlike investment in human capital, has an opportunity cost. 
B) physical capital, like investment in human capital, has an opportunity cost. 
C) human capital is particularly attractive because it involves no externalities. 
D) human capital has been shown to be relatively unimportant, relative to investment in physical capital, for a country's long-run economic success.

Question 2

All else equal, which of the following would tend to cause real GDP per person to rise?

Accepted Answer

A) a change from inward-oriented policies to outward-oriented policies 
B) an increase in investment in human capital 
C) strengthening of property rights. 
D) All of the above are correct. 
A) a change from inward-oriented policies to outward-oriented policies 
B) an increase in investment in human capital 
C) strengthening of property rights. 
D) All of the above are correct.

Question 3

In the long run, a higher saving rate

Accepted Answer

A) cannot increase the capital stock. 
B) means that people must consume less in the future. 
C) increases the level of productivity. 
D) None of the above is correct. 
A) cannot increase the capital stock. 
B) means that people must consume less in the future. 
C) increases the level of productivity. 
D) None of the above is correct.

Question 4

Over the period 1890-2008, Japan experienced a 2.71 percent average annual growth rate of real GDP per person.

Accepted Answer

A) True 
 B)False

Question 5

The dictator of a certain country requires that companies planning to open or expand must pay a large fee to file an application one year prior to building new factories or expanding existing ones. Other things the same, in the long run this requirement would

Accepted Answer

A) reduce real GDP per person and productivity. 
B) reduce real GDP per person but not productivity. 
C) reduce productivity but not real GDP per person. 
D) None of the above is correct. 
A) reduce real GDP per person and productivity. 
B) reduce real GDP per person but not productivity. 
C) reduce productivity but not real GDP per person. 
D) None of the above is correct.

Question 6

Country A and country B are the same except country A has a capital stock of 5,000 a population of 12,000 and employment of 10,000. Country B has a capital stock of 8,000 and a population of 24,000 and employment of 20,000.

Accepted Answer

A) Country A has a higher standard of living and country B will not catch up. 
B) Country A has a higher standard of living but country B will catch up. 
C) Country B has a higher standard of living and country A will not catch up. 
D) Country B has a higher standard of living but country A will catch up. 
A) Country A has a higher standard of living and country B will not catch up. 
B) Country A has a higher standard of living but country B will catch up. 
C) Country B has a higher standard of living and country A will not catch up. 
D) Country B has a higher standard of living but country A will catch up.

Question 7

If an American-based firm opens and operates a new watch factory in Panama, then it is engaging in

Accepted Answer

A) foreign portfolio investment. 
B) foreign financial investment. 
C) foreign direct investment. 
D) indirect foreign investment. 
A) foreign portfolio investment. 
B) foreign financial investment. 
C) foreign direct investment. 
D) indirect foreign investment.

Question 8

If a rich country reduced subsidies to domestic producers of goods that poor countries have a comparative advantage producing, the standard of living in these poor countries would likely rise.

Accepted Answer

A) True 
 B)False

Question 9

The president of a poor country has announced that he will implement the following measures which he claims are designed to increase growth: 1. Reduce corruption in the legal system; 2. Reduce reliance on market forces because they allocate goods and services in an unfair manner; 3. Restrict investment in domestic industries by foreigners because they take some of the profits out of the country; 4. Encourage trade with neighboring countries; and 5. Increase the fraction of GDP devoted to consumption. How many of these measures will have a positive effect on growth?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 10

The inputs into production of goods and services that are provided by nature, such as land, rivers, and mineral deposits are called

Accepted Answer

A) physical capital. 
B) natural resources. 
C) human capital. 
D) technological knowledge. 
A) physical capital. 
B) natural resources. 
C) human capital. 
D) technological knowledge.

Question 11

If a country's saving rate increases, then in the long run

Accepted Answer

A) productivity is higher but real GDP per person is not higher. 
B) real GDP per person is higher but productivity is not higher. 
C) productivity and real GDP per person are both higher. 
D) neither productivity nor real GDP per person is higher. 
A) productivity is higher but real GDP per person is not higher. 
B) real GDP per person is higher but productivity is not higher. 
C) productivity and real GDP per person are both higher. 
D) neither productivity nor real GDP per person is higher.

Question 12

According to some estimates, over the last two decades China has had an annual average growth rate of about 12 percent.

Accepted Answer

A) True 
 B)False

Question 13

What is the difference between human capital and technology?

Accepted Answer

Technology is society's understanding of

Question 14

Suppose a person receives an education in her home country. Which of the following will tend to make the increase in GDP of the person's home country larger than the increase in this person's income?

Accepted Answer

A) externalities and brain drain 
B) externalities but not brain drain 
C) brain drain but not externalities 
D) neither externalities nor brain drain 
A) externalities and brain drain 
B) externalities but not brain drain 
C) brain drain but not externalities 
D) neither externalities nor brain drain

Question 15

Economists generally believe that inward-oriented policies are more likely to foster growth than outward-oriented policies.

Accepted Answer

A) True 
 B)False

Question 16

Each day Sonja works 8 hours and produces 8 units of goods and services. Emma works 10 hours each day and produces 9 units of goods and services. It follows that

Accepted Answer

A) Sonja's productivity is higher than Emma's. 
B) Emma's productivity is higher than Sonja's. 
C) Emma's income per hour will be higher than Sonja's. 
D) Sonja's income per day will be higher than Emma's. 
A) Sonja's productivity is higher than Emma's. 
B) Emma's productivity is higher than Sonja's. 
C) Emma's income per hour will be higher than Sonja's. 
D) Sonja's income per day will be higher than Emma's.

Question 17

Other things the same, if a country increased its saving rate, in 40 years or so it would likely have

Accepted Answer

A) higher productivity, and a higher growth rate of real GDP. 
B) higher productivity, but not a higher growth rate of real GDP. 
C) the same productivity and growth of real GDP it began with. 
D) None of the above is correct. 
A) higher productivity, and a higher growth rate of real GDP. 
B) higher productivity, but not a higher growth rate of real GDP. 
C) the same productivity and growth of real GDP it began with. 
D) None of the above is correct.

Question 18

Table 12-1.Athens and Troy both produce only ribs and baked potatoes.  
-Refer to Table 12-1. Which of the following is correct?

Accepted Answer

A) Both real GDP and real GDP per person are higher in Athens than Troy. 
B) Real GDP is higher in Athens while real GDP per person is higher in Troy 
C) Real GDP is higher in Troy while real GDP per person is higher in Athens. 
D) Both real GDP and real GDP per person are higher in Troy than Athens. 
A) Both real GDP and real GDP per person are higher in Athens than Troy. 
B) Real GDP is higher in Athens while real GDP per person is higher in Troy 
C) Real GDP is higher in Troy while real GDP per person is higher in Athens. 
D) Both real GDP and real GDP per person are higher in Troy than Athens.

Question 19

Which of the following is physical capital?

Accepted Answer

A) the strength of workers 
B) the knowledge of workers 
C) financial assets like cash and bonds 
D) the equipment in a factory 
A) the strength of workers 
B) the knowledge of workers 
C) financial assets like cash and bonds 
D) the equipment in a factory

Question 20

Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following could explain the failure of a poor county to catch up?

Accepted Answer

A) The poor country has outward-oriented trade policies. 
B) The poor country allows foreign direct investment. 
C) The poor country has poorly developed property rights. 
D) All of the above are correct. 
A) The poor country has outward-oriented trade policies. 
B) The poor country allows foreign direct investment. 
C) The poor country has poorly developed property rights. 
D) All of the above are correct.

Exam 12: Production and Growth

Investment in

All else equal, which of the following would tend to cause real GDP per person to rise?

In the long run, a higher saving rate

Over the period 1890-2008, Japan experienced a 2.71 percent average annual growth rate of real GDP per person.

The dictator of a certain country requires that companies planning to open or expand must pay a large fee to file an application one year prior to building new factories or expanding existing ones. Other things the same, in the long run this requirement would

Country A and country B are the same except country A has a capital stock of 5,000 a population of 12,000 and employment of 10,000. Country B has a capital stock of 8,000 and a population of 24,000 and employment of 20,000.

If an American-based firm opens and operates a new watch factory in Panama, then it is engaging in

If a rich country reduced subsidies to domestic producers of goods that poor countries have a comparative advantage producing, the standard of living in these poor countries would likely rise.

The inputs into production of goods and services that are provided by nature, such as land, rivers, and mineral deposits are called

If a country's saving rate increases, then in the long run

According to some estimates, over the last two decades China has had an annual average growth rate of about 12 percent.

What is the difference between human capital and technology?

Suppose a person receives an education in her home country. Which of the following will tend to make the increase in GDP of the person's home country larger than the increase in this person's income?

Economists generally believe that inward-oriented policies are more likely to foster growth than outward-oriented policies.

Each day Sonja works 8 hours and produces 8 units of goods and services. Emma works 10 hours each day and produces 9 units of goods and services. It follows that

Other things the same, if a country increased its saving rate, in 40 years or so it would likely have

Table 12-1.Athens and Troy both produce only ribs and baked potatoes. -Refer to Table 12-1. Which of the following is correct?

Which of the following is physical capital?

Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following could explain the failure of a poor county to catch up?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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